A news release from the Real Estate Board of Greater Vancouver (REBGV) states that "conditions continue to favour buyers in the Greater Vancouver housing market." REBGV reports that residential property sales of detached, attached and apartment properties in the region reached 1,516 in September, a 32.5 per cent decline compared to the 2,246 sales in September 2011 and an 8.1 per cent decline compared to August 2012. For Bowen Island, the percentages dropped 1.9 per cent compared to September 2011 and 0.6 per cent compared to August.
According to the Multiple Listing Service, there have been 35 residential property sales and 125 property listings in Bowen Island so far this year. The benchmark price for a detached property on Bowen is currently $590,200. But does that mean that this is a good time to invest in property? Bowen Islander Hans Merkelbach has been involved in financial services and he's managed other people's money for all his working life. The key to investing, Merkelbach believes, is a focused sector analysis.
Merkelbach was born in the Netherlands and came to Canada in 1956. He retired in 1990 but started to work again in 1999. "In 2010, I sold my assets under management to Anthony Borthwick, formerly with AGF Funds Ltd.At that time, I managed about $130 million for my clients," Merkelbach said. He has been written up in the National Post, Globe & Mail and was recently a contributor to the bestseller Panderer to Power The Untold Story of how Alan Greenspan enriched Wall Street and left a legacy of recession authored by Frederick J. Sheehan.
"I was licensed with Dundee Wealth Management, a securities company with $50 billion under management. I'm still in touch with clients and I do strategy and analysis," Merkelbach says, adding that the majority of his clients had quadrupled their money since 2000 by the time he retired in 2010. The secret to Merkelbach's success was to patiently watch different sectors. "You learn a lot from monetary analysis," he says. "The most important thing that is happening now is that the masses are loaded with debt. The US government has a total debt that includes unfunded liabilities like Medicare and it comes to about $40 trillion. The annual US Government deficit is $1 trillion. How will they solve that problem? They'll likely devalue their debt. Roosevelt devalued the dollar in 1933/34 by 65 per cent. That means that if people had $1000 in the bank, they woke up and a few days later could buy only $350 worth of goods."
When it comes to personal debt, Merkelbach says that most people in Canada have invested everything in their homes. "Real estate in the Greater Vancouver area and elsewhere in B.C. as well as other major cities in Canada such as Toronto, Montreal and Winnipeg are slowly imploding," Merkelbach says. "The last collapse in real estate was in 1973/74. Back then, the prices dropped dramatically. In Vancouver, the average price of a single family dwelling a few months ago was over $1 million. To compare that, the average in Toronto is $850,000. People are maxed out and many have real estate with 95 per cent mortgages on it."
But Merkelbach believes that Canadians have been better equipped to weather a crisis due to the country's resources. "We'll be slightly better off when interest rates start increasing," he said. "But where will the real estate market go in the next 10 years? We've been adding and adding to housing prices yearafter year. The assessment goes up, values go up. I believe that in 10 years, the values will be lower than they are today." Due to that trend, Merkelbach believes that real estate is becoming an increasingly poor investment option with certain exceptions depending on location.
Merkelbach doesn't know how this will affect Bowen Island but believes that the market will also come down. Recently, a high-waterfront home sold for $950,000 - $300,000 below the assessed value. "The 2012 assessments were based on run-away prices, in other words, they were at their highest point ever," he said, adding that he appealed his property assessment and had it reduced substantially. Merkelbach knows of several people who had their assessment reduced in an effort to pay a lower (and a more realistic) property tax.
Yet real estate holds its value better over time than almost everything else, Merkelbach says. "Life itself is very expensive now," he said. "You have politicians and bureaucrats who continue devaluing people's purchasing power. The government devalues money, through taxation and inflation. They say we only have two per cent inflation but that's not entirely true. True inflation runs much higher." Merkelbach thinks that the financial markets are staying afloat by "printing money ad infinitem," and adds, "Everyone thinks that the economy is recuperating but we likely will see higher inflation starting in the last quarter of this year. I believe that toward the middle of 2013, we will see a collapse of the financial markets - 2013 and 2014 will be bleak years and there will be more unemployment in the western world."
